[Gangnam Perspective] An Indifferent Nation in the Face of the 'Corporate Profit-Sharing' Bombshell

In October, while the Korea-U.S. tariff negotiations were unfolding with urgency, a high-ranking official, A, close to President Lee Jae-myung, gathered ministry officials and raised the following issues and directives: 1 The government makes every effort to help corporations win contracts, but is it right for only a few companies to reap all the benefits? 2 Find ways for beneficiary companies to contribute back to the government. The intention was to develop a rationale and policy alternatives to address the criticism that a handful of companies are enjoying all the profits.
On the 11th, the Ministry of Economy and Finance presented its concept for a 'Strategic Export Financing Fund' during a presidential policy briefing. President Lee stated, 'Even when the nation mobilizes its capabilities to secure large-scale strategic projects, only a small number of companies benefit,' adding, 'If the Strategic Export Financing Fund supports these deals and recoups a portion of the profits, it could help the economy.' These remarks echoed what official A had said two months earlier. Acting on the president’s intent, A issued directives to the ministries, and within two months, the result was the Strategic Export Financing Fund.
This fund received less attention as it was overshadowed by other major policy packages announced at the same time, such as the 150 trillion won National Growth Fund and the Korea Investment Corporation (KIC). The media has also tended to interpret the Strategic Export Financing Fund as a plan for corporate support or national wealth creation.
However, it is important not to forget that the starting point for the Strategic Export Financing Fund is not 'corporate support' but rather 'profit-sharing.' There are ongoing discussions about creating a separate account within the fund for industrial support, to which companies would contribute. If a company benefits from joint public-private efforts to secure contracts, it would be required to pay a certain percentage of its revenue or profit.
The Ministry of Economy and Finance cites the insufficiency of existing policy finance in the defense export sector as the reason for introducing the fund. But is current financial support truly inadequate? In the second defense export contract with Poland, the government agreed to provide loans and guarantees for 80% of the total amount. Yet, the deal has been delayed due to unfavorable terms. If the government increases support beyond 80% and lowers guarantee fees to close the deal, is this really national wealth creation, or is it simply undercutting ourselves?
Most importantly, Article 59 of the Constitution of the Republic of Korea stipulates that all taxes must be established by law, adopting the principle of statutory taxation. If contributions or levies are mandatory or used for general fiscal purposes, they may be interpreted as de facto taxes, raising constitutional concerns. This is why controversies surrounding the Mir Foundation and the K-Sports Foundation during the Park Geun-hye administration are resurfacing.
With this in mind, the government is considering enacting new legislation and limiting the fund’s purpose strictly to supporting the industrial ecosystem. Nevertheless, fundamental questions remain as to whether it is justifiable to require additional contributions from companies that already pay corporate taxes, simply because they have benefited from policy finance.
Moreover, the moment the government demands contributions from companies, the Strategic Export Financing Fund risks becoming a mechanism for government revenue recovery rather than a policy finance tool. If administrative or financial burdens are added simply because a company used policy finance, businesses may alter their behavior. They might turn to foreign financial institutions instead of the Export-Import Bank of Korea or establish separate entities to raise funds.
Even if companies accept profit-sharing, the issues do not end there. Contributing companies may view their payments as part of a 'transaction' and demand greater policy consideration from the government. The government, in turn, may begin to view companies differently based on whether they have contributed. As personal relationships take precedence over public standards, the neutrality of policy decisions is compromised. This is where crony capitalism begins.
When I first heard the news that companies would be required to pay contributions from their profits, I was shocked. I am even more disconcerted by the indifference of our society to this news. It seems to be the result of a series of unconstitutional issues piling up.
Currently, the Ministry of Economy and Finance has established an Export Finance Reform Task Force to devise ways to preempt potential problems. No matter how hard they try, introducing a new fund on top of the existing tax system and export finance regime is nothing more than a redundant layer. Because of this awkwardness, flawed systems will inevitably be exposed over time. In an era where the 'duty of obedience' has disappeared, public officials must meticulously document every step of this awkward fund’s operation.
syhong@fnnews.com Reporter